In the current forum discussion, Cam Fitzgerald focuses on coffee's bear market to provide some lucid insights into the deflationary dynamic at work in the commodity markets. He notes that although the price of coffee beans has collapsed, falling by two-thirds since 2011, Starbucks is still charging the same four bucks for a large latte. This profit-friendly anomaly has held true for many other companies that benefit from a widening spread between commodity prices and end products. It would seem to flout the laws of supply and demand, but Cam says the textbook relationship will reassert itself with a vengeance as consumers become increasingly frugal under the weight of a deepening Great Recession. From a technical standpoint, his theory looks quite solid. The weekly chart (see inset) implies that a pound of coffee currently trading on NYMEX for $1.03 is about to fall by half. If the futures were in fact to achieve the Hidden Pivot target of 53 cents, that would represent an 83% drop from 2011's all-time high of $3.08. Coffee lovers may have something to look forward to, but they should be careful what they wish for, since the implication of coffee beans selling for 50 cents a pound is that the world by then will be chest-deep in a deflation of falling wages, plummeting asset values and significantly lower corporate profits.
HGU13
HGU13 – September Copper (Last:3.1335)
– Posted in: Current Touts Free Rick's PicksOn speculation that a broadening Chinese slowdown could devastate commodity prices, I've reproduced September Copper's weekly chart. Price action precisely at and around the p midpoint (red line) implies not only that we are using the right pattern to produce an accurate and reliable target at 2.7780, but that the futures have crossed the point of no return on their way down to it. If the global recession is about to deepen, we should see 2.7780 give way within days of first being touched. However, a strong bounce from very near that number would imply that the world's economy is not necessarily about to deep-six.
HGU13 – September Copper (Last:3.0635)
– Posted in: Current Touts Rick's PicksIf the futures close beneath this week's 2.9855 so-far low, expect further slippage to at least 2.9765, the next Hidden Pivot support in the sequence shown. Camouflageurs keen on bottom-fishing should look for an entry spot on charts of minute degree or less. Notice that the highest possible 'A' here -- a one-off, in this case -- implies a bear market low at 2.6955, a 9.4% fall from these levels. ______ UPDATE (July 1, 2:00 a.m. EDT): The support noted above has held so far, but if the rally is the real McCoy it should be able to at least equal the 3.235 D target of (60-min) A=2.9855 (6/25); B=3.0935 (6/25); C=3.0155 (6/27). _______UPDATE (July 8, 2:28 a.m. EDT): The rally appears to have failed from a high at 3.1790 that fell well shy of my benchmark.
